BRUSSELS, July 15 (Reuters) - In the years-long campaign totie a web of sanctions around Iran and stall its nuclearprogramme, the European Union may just have met its biggestobstacle: its own law courts.

Fearing Tehran is seeking the means to make bombs, Europe'sgovernments have been combing through Iran's political elitesand businesses to find people and companies linked to thefinancing and technical aspects of its nuclear work.

They have frozen their assets, refused visas and bannedcompanies in the European Union from doing business with them.But dozens of those targeted have challenged the restrictions incourt and some are beginning to win, embarrassing Europe'spolicymakers and causing alarm in the United States.

None of the court judgments are yet final. But with Israelbrandishing threats against a nuclear programme that Iraninsists has no military purpose, Washington worries that anyweakening of sanctions may raise the risk of war.

At the heart of the issue is the refusal by EU governmentsto disclose evidence linking their targets to Iran's nuclearwork. Doing so in court, they say, may expose confidentialintelligence, undermining efforts to combat the programme.

The courts have effectively rejected that argument, sayingthat if a case is to be made, evidence must be presented.Lawyers for the Iranians argue there simply is no evidence thatproves any link to the nuclear programme - a view supported byBritish judges who did review some secret material this year.

"It is very clear there is no evidence," said SaroshZaiwalla, senior partner at Zaiwalla & Co, a London law firmwhich has successfully represented Iran's Bank Mellat inlitigation against sanctions imposed by the EU.

The bank, one of the biggest private lenders in Iran, won acase in January in the European Union's Luxembourg-basedsecond-highest court. It had challenged an EU move in 2010 tofreeze its assets, saying the EU had failed to prove the bankprovided banking services for the nuclear programme. The courtagreed.

"The chairman of the court asked the EU lawyers, 'can youshow me the evidence?'. And they said 'no, it's Iran, and youmust presume there is evidence'," Zaiwalla said.

"The judge was very upset and said 'this is a court of lawand you cannot assume things'."

In its Jan. 29 judgment, using dense legal language, theGeneral Court said the council of EU governments was "in breachof the obligation to state reasons and the obligation todisclose to the applicant ... the evidence adduced against it".

SECRECY DILEMMA

The lifting of sanctions against Bank Mellat is postponedfor now, pending an appeal by EU governments to Europe's highestcourt. But the case illustrates the dilemma facing the EuropeanUnion in its push to stop Iran from advancing the atom work.

Government lawyers are telling the courts to trust them andthe courts are refusing. To safeguard its sanctions policy andits economic pressure on Iran, the EU may have to presentevidence - including sensitive intelligence - in court.

But because of rules governing pan-European courts, allevidence would then become public which may damage clandestineoperations and unravel the process of devising sanctions.

"There is nothing in the current rules to enable us toconsider sharing information without it becoming public," saidone European diplomat, speaking on condition of anonymity.

"This is the crux of the issue. We cannot just be handinginformation around."

In Washington, anxiety over court rulings is mounting.

"It's a real concern of ours that the EU is havingdifficulties sustaining some of its designations," David Cohen,the U.S. Treasury Department's Under Secretary for Terrorism andFinancial Intelligence, told Reuters.

Lawyers for the Iranian plaintiffs paint the conflict as ahuman rights issue, praising the Luxembourg court for decisionsthey say amount to taking a stand against government abuse.

"It may be politically embarrassing," said Maya Lester, aLondon-based lawyer who represents companies and individuals inlitigation concerning European sanctions, including the Iraniancentral bank and the country's main tanker company, NITC.

"But in terms of upholding the rule of law, what theEuropean court has done is impressive and quite brave. It showsit to be a court upholding human rights ... which is not easygiven how political Iranian sanctions are."

REPEATED CORRESPONDENCE

The lawyers for Bank Mellat had asked EU governments to showthem information linking the lender to the nuclear programme andconsider their complaint that sanctions were not justified, in aseries of letters in 2010 and 2011.